CNBC LEADERS: Ken Griffin 9/19/23

Sara Eisen (0:00)

Okay, text from the wedding planner.

SPEAKER_2 (0:02)

She's talking about a cake pop mural.

SPEAKER_3 (0:05)

Ah, exciting.

SPEAKER_4 (0:07)

Ooh, it's $8,000.

SPEAKER_3 (0:10)

Oh, I don't know, we're trying to save for a house. Well, you only get married once, or twice. The three time stops.

SPEAKER_2 (0:16)

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Sara Eisen (0:32)

Citadel's CEO and founder, Ken Griffin dominates the financial world. His firm, Citadel's recent $16 billion record profit, a crowning victory, making it the top earning hedge fund in history.

I'm Sara Eisen, and I sit down exclusively with Griffin to hear his thoughts on everything, from the markets, to artificial intelligence, to the future of education.

Ken Griffin (0:55)

Inflation probably comes down over the months ahead. The negative of the story, again, we're seeing higher prices at the gasoline pump.

And unfortunately, gasoline is one of those things that you buy every week for most American families. AI is going to have a very uneven impact across the economy. In certain areas, for example, call centers, generative AI is going to be transformative.

Sara Eisen (1:22)

I think a lot of people are wondering if you're still backing Ron DeSantis.

Ken Griffin (1:25)

I don't know what happened in the DeSantis administration in Florida. The future of America is our children. It's our kids.

And if we can't educate the next generation of American students to be successful, our country's over. Either secure the border or make sure that people who come here can support their families, find entry-level employment and build careers.

Sara Eisen (1:50)

This is CNBC Leaders with Ken Griffin.

Ken Griffin (1:56)

It's been a really good year for the market, particularly with the backdrop of higher real interest rates. So if you look at both the yield on the 10 year bond and more importantly, the real yield, for example, in the five year tips bonds, we've seen again an increase in real rates and nominal rates, and yet the stock market's been resilient.

So that's a really interesting year to see the resiliency of our stock market against this backdrop that would usually be very challenging for equities.

Sara Eisen (2:27)

Think it can continue?

Ken Griffin (2:29)

I'm a bit anxious that this rally can continue. Obviously one of the big drivers of the rally has been the just frenzy over generative AI, which has powered many of the big tech stocks.

I like to believe that this rally has legs. I'm a bit anxious. We're sort of in the seventh or eighth, any of this rally.

Sara Eisen (2:50)

Well, part of it has been the soft landing story.

Are you a buyer of that? The fact that we just haven't gone into recession despite 525 basis points of tightening.

Ken Griffin (2:59)

So it takes about a year to two years for an interest rate hike to work its way through the economy. It's not instantaneous. We're now at the point where we're gonna see the impact of these hikes really start to play out. We're seeing the job market starting to weaken. There's been a number of news stories in recent weeks about how companies are willing to pull back what they're paying for starting roles.

We're seeing signs that consumers have had enough in terms of price increases that they're starting to walk away from products they're trying to push through price increases. So there's signs here that we're heading very quickly into hopefully the soft landing, potentially a more difficult scenario moving into mid to late last year in terms of an actual recession.

Sara Eisen (3:51)

Sounds like that's what you're expecting, a recession.

Ken Griffin (3:54)

Look, my personal view is that the United States economy is enjoying a tremendous amount of unanticipated stimulus from Washington still.

The federal deficit this year is gonna total almost 6% of GDP. It is completely unsustainable, but it has been yet another shot of adrenaline to the economy that our fiscal largesse continues to push the economy forward, but leaving an ever bigger bill for future generations.

Sara Eisen (4:25)

Do you think, and it also complicates the Fed's job a little bit, we're still getting these numbers. Inflation has come down a lot, but looks to be sticky.

Ken Griffin (4:34)

Well, I mean, he's no win situation.

Sara Eisen (4:36)

Powell.

Ken Griffin (4:37)

The Poll is, right? Because monetary tightening can only do so much to offset fiscal stimulus.

And in some sense, it's like he's showing up at a fight with both of his hands tied behind his back because DC is just on a different agenda than he is. He's trying to prudently slow the economy, bring inflation back down, and really engineer the hopeful soft landing. And at the same time, whether it's the Inflation Reduction Act or other programs that have increased spending, we keep stimulating the economy out of DC.